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Project history 

Three Indian software experts joined forces in late 2017 to address the already then apparent scalability problems and congestion on the Ethereum blockchain.

The project, initially called MATIC, was one of the first successful attempts at building Layer-2 scaling solutions (ie. networks or technologies that operate on top of an underlying blockchain and seek to improve the efficiency of the underlying technology). The MATIC token started trading in April 2019 after an IEO (initial exchange offering), and the mainnet launched in June 2020.

The project was later rebranded and renamed to Polygon. The scope was expanded to include a comprehensive set of scaling solutions, and an infrastructure platform to transform Ethereum into a multichain system. With the recent fundraise, the project’s ambition has been extended to offering developer toolkits for all types of applications and use cases.


MATIC initially used Ethereum “child chains” (called plasma) for scaling. Their mainnet is a proof-of-stake chain that serves as a “commit chain” to Ethereum (commit chains bundle together batches of transactions and confirm them in one go before sending the data on to the main chain).

With the new expanded scope, Polygon is implementing a variety of scaling solutions in parallel. These include interchain communication protocols, and various “rollup” solutions where the transactions are processed off-chain before confirming them on the main chain, either by providing a validity proof with the transactions (“zero knowledge”), or by assuming validity but running random spotchecks (“optimistic”).

In May 2021, Polygon launched software developer kits to build standalone chains, with the aim of supporting Ethereum’s transformation into the “internet of blockchains”.

Key people

Software entrepreneurs and programmers Jaynti Kanani, Sandeep Nailwal and Anurag Arjun cofounded Polygon (then called MATIC). After devising a proof of concept in 2017, a private company was incorporated in Q2 2018 in India.

As MATIC rebranded to Polygon, they were joined by Serbian software engineer Mihailo Bjelic whose slightly different ideas and approach were blended with MATIC’s ideas to devise the revamped strategy for Polygon.

After small friends & family and private capital raises, they received backing from Coinbase Ventures and proceeded to raise USD 5 million through a token sale in 2019. In 2021, Mark Cuban announced his investment in Polygon treasury tokens.

Recently Polygon raised USD 450 million from high profile venture capital firms through the sale of treasury tokens.


The rate of user growth has been very strong on the Polygon network, with daily active users growing from below 1,000 at the end of 2020 to over 550,000 by October 2021, surpassing Ethereum’s daily active users. The number of transactions also flipped Ethereum around May 2021 and has consequently grown to a multiple of Ethereum’s daily transactions.

Polygon has been successful in attracting projects, with the number of projects now in the thousands, including prominent protocols such as Aave, Curve, 1inch, 0x, Sushiswap, Chainlink.

Polygon has been entering into partnerships to accelerate the build out. They joined forces with Ernst & Young to create permissioned private chains as well as to build a new type of “rollup” (offchain processing) scalability solution.

They integrated with Axelar to access interchain communication protocols, and merged with Hermez Network, another scalability project for Ethereum, to acquire “zero knowledge” scaling capability. In December 2021, they acquired Mir, another zero knowledge proof project, for USD 400 million.

Polygon has been using treasury funds to invest also in growing their ecosystem, such as earmarking USD 100 million in 2021 to invest in NFT and gaming projects, and creating another USD 100 million ecosystem fund after the recent USD 450 million fundraise.

Supply model/Tokenomics

10 billion MATIC tokens were minted. All the tokens will vest by the end of 2022. Treasury tokens used in acquisitions may have further vesting schedules imposed pm them (e.g. tokens used for the Mir acquisition vets over 3 years).

12 percent of the tokens were earmarked for staking rewards for validators, and only 23 percent were sold to investors in the token sale.

Almost half of the tokens are kept for the Polygon Foundation treasury and as funds to support the ecosystem’s growth. Polygon has been using this war chest to make significant investments and acquisitions, such as the USD 250 million Hermez Network merger (one of the first ever token mergers in the crypto asset space) or the USD 400 million Mir acquisition.

Polygon tokens can be staked to earn a share of the transaction fees paid to validators, and until 2025 also an additional reward of tokens from the token pool reserved for this purpose.

Key value drivers 

  • Polygon has been proven right in their original thesis to offer solutions to the scalability bottlenecks on Ethereum. As the Ethereum network became congested and transaction fees became very high over the past year, it fueled exceptional growth for Polygon.
  • However, several other projects have also been working on scalability solutions. Such projects have proliferated recently, and the competition in the scalability sector is strong.
  • Polygon have built an excellent reputation, with a proven ability to execute, to innovate, and if necessary to use acquisitions to move faster. They have been staying ahead of the competition and their adoption trends remain very bullish. The growth in the number of applications building on Polygon has been exponential.
  • The rollout of Ethereum 2.0 poses some risk as it will reduce the need for Layer 2 scaling. However, as applications such as decentralised finance or NFTs/the metaverse proliferate and grow, scalability will need to keep pace, and Ethereum 2.0 will almost certainly not be the final answer to network congestion issues. At the same time, Polygon has also faced some issues with congestion after their extraordinary success in attracting projects and users.
  • The large overhang of tokens held by the Polygon treasury and the team poses some concern for the token price.

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